Global stock markets rebound slightly, South Korean stocks close up 2%, SK Hynix surges over 4%, US dollar dips slightly

Federal Reserve Chairman Waller refused to give a clear signal for further interest rate hikes, allowing the market to stabilize from the shock caused by this week’s inflation data. Global stock markets generally rose, while the US dollar came under pressure and retreated.

Speaking at an International Monetary Fund event in Bangkok on Thursday, Waller described artificial intelligence as the most profound transformation of the US and global economy in his lifetime, and said it would be a positive supply shock in the medium term. He made no forward-looking comments on the path of monetary policy, only reiterating that the Fed remains committed to achieving price stability and said that he "will not prejudge the outcome of meetings."

Waller's remarks quickly led markets to reprice expectations. Traders lowered the probability of a Fed rate hike this month from over 25% on Thursday to 15%. The dollar index fell 0.1%, after shedding 0.3% in the previous trading day—its biggest one-day drop in over a month. Asia-Pacific and European stocks rose, and US equity futures edged higher.

DBS Bank macro strategist Wei Liang Chang noted, "Markets were reassured by Waller reiterating that AI will boost productivity in the medium term. This helps ease inflation expectations and reduces concerns of consecutive rate hikes."

• The Euro Stoxx 50 Index rose 0.4%, the German DAX rose 0.5%, France’s CAC 40 gained 0.3%, while the UK’s FTSE 100 slipped 0.4%.
• South Korea’s KOSPI closed up 2% at 5668.05 points. The Nikkei 225 closed up 1.4% at 65,324.29 points; the TOPIX closed up 1.7% at 4066 points.
• The US 10-year Treasury yield rose 3 basis points to 5.09%
• Japan’s 10-year yield rose 4.5 basis points to 2.935%
• Australia’s 10-year yield rose 2 basis points to 5.23%
• The dollar index slipped 0.1%
• Gold prices were little changed at $4,172 per ounce.
• Brent crude fell 0.7% to $105.20 a barrel

Saxo Markets Chief Investment Strategist Charu Chanana stated, "Waller’s refusal to commit to further hikes led to the unwinding of some Fed rate hike bets. After the release of robust inflation data, he said he would ‘not prejudge the outcome of meetings,’ a phrasing that weighed on the dollar."

The Fed raised rates by 25 basis points in September, the first hike since 2023, with unanimous support from all 19 policy members. Most members also anticipated another hike this year. In the following weeks, several officials reiterated the need for further tightening was possible, but stressed that there was enough time to gather economic data before making decisions.

Before Waller’s speech, global stocks had already turned higher as the chip stock sell-off began to subside. In Asia, Samsung Electronics and SK Hynix both rose more than 4%, pushing the KOSPI up 2% to close at 5668.05 points, rebounding from Thursday’s low, which was the lowest close since April. The Nikkei 225 closed up 1.4% at 65,324.29 points; the TOPIX closed up 1.7% at 4066 points.

European markets also opened higher overall. The Euro Stoxx 50 Index was up 0.4%, the German DAX rose 0.5%, France’s CAC 40 gained 0.3%, while the UK’s FTSE 100 slipped 0.4%.

Notably, Indonesia’s stock market once plummeted more than 11% intraday, the largest drop since January 1998, after MSCI announced it would remove Indonesia from the emerging markets index. The Indonesian rupiah also slipped slightly.

Gold prices were little changed at $4,172 per ounce. Brent crude fell 0.7% to $105.20 a barrel. Elevated oil prices continue to support inflation expectations—since the onset of the Middle East conflict, oil prices have been an important factor keeping US inflation stubbornly high.

Whether this round of market rebound can continue will depend to some extent on whether gains can broaden from the tech-heavy stocks that have dominated this year’s advance to other sectors. This week’s volatility revealed the risk of market overreliance on AI-related stocks, and broader sector participation would help mitigate this concentration risk.

Toyo Securities strategist Ryuta Otsuka said, "At present, it appears to be a technical rebound and overall market sentiment has calmed somewhat." He also cautioned that as investors continue to track earnings data and "search for a bottom" next week, market volatility may remain relatively high.